Financial Highlights (for the six months ended June 30, 2008 in accordance with IFRS):
· Gross written premiums, policy fees and premium deposits grew 28.5% to RMB69,228 million (1H 2007: RMB53,885 million)
· Total income fell 8.9% to RMB63,633 million (1H 2007: RMB69,819 million) due to the decrease in investment returns. Net profit slipped 2.5% to RMB9,719 million (1H 2007: RMB9,969 million)
· Total investment yield recorded 3.6% (1H 2007: 8.5% )
· Total assets decreased 0.5% to RMB 688,773 million as at June 30, 2008 (as at December 31, 2007: RMB692,222 million)
· Earnings per share was RMB1.29 (1H 2007: RMB1.39)
· Interim dividend of RMB0.20 per share was approved (1H 2007: RMB0.20)
Operational Highlights (for the six months ended June 30, 2008)
· Life insurance agency force maintaining its growth momentum, reaching 315,000
· Market share of life insurance business fell to 12.8% from 16.0% as at December 31, 2007, while Ping An Property & Casualty’s market share improved to 10.7% from 10.3% as at December 31, 2007
· For annuity business, entrusted assets, investment management assets and pension contribution are all the highest in the industry
· Banking business achieved a non-performing loan ratio of 0.5%, amongst the lowest in the industry; the accumulated number of in-force credit cards has reached 700,000 in Shanghai and Shenzhen; Shenzhen Ping An Bank obtained regulatory approval to open a branch in Quanzhou, marking an important step forward for national operation
· Investment channels were further diversified and asset allocation further optimized
· Cross-selling has achieved remarkable results, and the synergies brought about by an integrated financial platform are becoming increasingly apparent
Hong Kong/Shanghai, August 15 2008 - Ping An Insurance (Group) Company of China, Ltd. (“Ping An” or “the Group”, HKEx: 2318; SSE: 601318) today announced steady and healthy growth across all businesses in the first half of 2008[1], despite unfavourable market conditions and complex operating environment. Ping An has leveraged its competitive advantages and integrated financial services model to actively respond to all the challenges.
Gross written premiums, policy fees and premium deposits reached RMB69,228 million, an increase of 28.5% compared with RMB53,885 million during the same period last year. Total investment income fell to RMB9,275 million from RMB25,737 million in the first half of 2007. Total investment yield decreased to 3.6% from 8.5%. Net profit decreased 2.5 % to RMB9,719 million (1H 2007: RMB9,969 million ).
By proactively adjusting asset allocation, Ping An mitigated the impact of a severe decline in equity markets. Ping An increased the proportion of fixed income investments, resulting in a 3.7% increase in net investment income. This increase in net investment income offset the significant decrease in net realised and unrealised gains and impairment losses. However, the significant decrease in total investment income definitely has certain negative impact on the Group’s net profit.
The Group’s total assets reached RMB688,773 million as at June 30, 2008 (as at December 31, 2007: RMB692,222 million), while embedded value reached RMB129,989 million (as at December 31, 2007: RMB150,311 million). The Board of Directors has approved a 2008 interim dividend of RMB0.20 per share.
Under PRC GAAP, the Group's premium income for the first six months of 2008 reached RMB69,228 million, up 28.5% compared with RMB53,885 million for the same period last year. Total investment income fell to RMB9,275 million from RMB25,737 million in the same period in 2007. Net profit decreased by12.2% to RMB 7,310 million (1H 2007, RMB8,326 million). Total investment yield decreased to 3.6% (1H2007: 8.5%).
Commenting on the 2008 interim results, Ping An Chairman and CEO Ma Mingzhe said: “By focusing on strategy of profitable growth, we have maintained strong growth momentum of our key businesses in the first half of 2008, despite bearish financial market conditions and a challenging operating environment that lowered net profits. This underlines the success of our model as an integrated financial corporation. Cross-selling has become a real competitive advantage and are driving healthy growth across all of our businesses.”
“I am proud of the fact that while we celebrated our 20th anniversary, Ping An marched into the ranks of the Fortune 500 companies for the first time. We also topped the list of the largest non-state-owned Chinese enterprises,” Mr. Ma said.
However, he added: “In the first half of the year, China experienced various natural disasters. As a way of expressing our deep condolence for the victims of Wenchuan earthquake, we have simplified our 20th anniversary celebration and donated a total of RMB75 million, from the company and staff combined, for disaster-relief and reconstruction for the disaster-hit areas.”
Looking ahead, the Group’s life insurance business will continue to implement its “Two Tier Market Development” strategy -- strengthening its leading market position in affluent urban areas and expanding into small and medium sized townships and counties. The property and casualty insurance business will continue its strategy to build sales channels aggressively and to control costs of sale effectively, so the property and casualty business can achieve the goal of “surpassing targets healthily”. Investment in systems and operational platforms will drive the expansion of Shenzhen Ping An Bank into a nationwide banking institution. The Group will emphasize investment risk control, push forward investment in non-capital markets and seek steady and decent returns, whilst third-party asset management business will be further expanded. Meanwhile, the Group continues to expand the breadth and depth of cross-selling, ensuring that synergies will be fully maximized.
Mr, Ma said: " Given our integrated financial platform, our prudent investment strategy and financial policies, our strong customer base and efficient centralized operations, Ping An is ready to overcome the challenges that lie ahead to achieve ‘sustainable, valuable and superior’ growth.”
Insurance: focus on profitable growth
Life Insurance
Gross written premiums, policy fees and premium deposits in the six months ended June 30, 2008 reached RMB54,557 million, up 29.1% from the same period last year (1H 2007: RMB42,248 million). Net profit from life insurance increased 38.3% to RMB8,325 million in the first half of 2008 from RMB6,018 million in the same period in 2007.
The strong growth of the Group’s life insurance business was driven primarily by high-margin individual life business. Gross written premiums, policy fees and premium deposits from individual life business increased 23.5% to RMB42,284 million in the six months ended June 30, 2008. This was primarily due to a 27.4% increase in first year premiums, policy fees and premium deposits compared to the same period in 2007, reaching RMB12,433 million in the first half of 2008, thanks to expanding agency force now reached 315,000 and continued productivity improvement.
The growth rate of the Group’s bancassurance was strong for the first half of 2008 but still below the industry average, meaning that the Group sacrificed total market share. By end of the reporting period, market share of the Group’s life insurance business fell to 12.8% from 16.0% as at December 31, 2007.
Nevertheless, Ping An successfully maintained the 13-month and 25-month persistency ratios at a satisfactory level of 90% and 80% respectively, thanks to the efforts to enhanced customer service quality. In addition, the Group has achieved encouraging progress in re-engineering back offices processes to provide support for the rapid growth of the life insurance business.
Property and Casualty Insurance
Amid an increasingly competitive market, the property and casualty insurance business recorded steady growth of 26.1% in gross written premiums to RMB14,671 million in the first half of 2008. Market share improved from 10.3% as at December 31, 2007 to 10.7% as at June 30, 2008. This was achieved by strengthening the distribution network, sharpening the focus on direct sales to high-end customers and strengthening the capability of the sales force. In addition, Ping An devoted increased efforts to developing low-cost sales channels, such as telemarketing and cross-selling, in order to increase the contribution of low-cost sales to the Group’s total sales.
Gross written premiums grew across all three business lines. Demand for automobiles in China led to an increase of gross written premiums in the automobile insurance business by 31.1% to RMB10,225 million in the first half of 2008. Gross written premiums attributable to non-automobile insurance business also posted growth of 12.2% to RMB3,650 million as a result of the increase in sales of commercial property insurance and cargo insurance. Gross written premiums attributable to the accident and health insurance business increased 36.8% to RMB796 million.
Natural disasters including snowstorms, earthquakes and floods, together with lower premium rates on compulsory third party automobile liability insurance, led to the increase to 106.1% of combined ratio. If taking out the net loss from natural disasters, the combined ratio of the property and casualty business would be 98.2%. As a result, net profits of our property and casualty insurance business were down 55.4% from RMB760 million in the first half of 2007 to RMB339 million in the same period in 2008.
Banking: National Network Steadily Progressing ; the accumulated number of in-force credit cards reached 700,000
Both the corporate and retail businesses of Shenzhen Ping An Bank enjoyed healthy and steady growth in the first half of 2008. Since the first launch of credit card, the accumulated number of in-force credit cards reached 700,000 in Shanghai and Shenzhen. The bank obtained regulatory approval to open a branch in Quanzhou, marking an important milestone in becoming a national banking business. Shenzhen Ping An Bank has increased investment heavily in infrastructure, including an integrated IT platform and recruitment to pave a solid foundation for a nationwide service network.
Loan quality continued to improve with non-performing loan ratio of 0.5%, amongst the lowest in the industry. The capital adequacy ratio and core capital adequacy ratio were comfortably above the regulatory stipulated level at 10.1% and 10.2% respectively as at June 30, 2008.
Net interest income in the first half of 2008 increased to RMB1,985 million from RMB1,459 million from the same period in 2007 due to the widening of the net interest spread. The cost-to-income ratio increased to 42.5%, primarily due to increased investments in the credit card business, IT infrastructure and opening of new sub-branches.
Net profit from the banking business fell 26.8% to RMB795 million in the first half of 2008 from RMB1,086 million in the same period in 2007. However, if the one-off effect (RMB409 million in total) of non-performing package assets disposals and write-back of litigation provisions incurred in the first half of 2007 was excluded, the net profit from our banking business would have recorded an increase, despite heavy capital expenditure and strategic investment.
Investment Business: Investment Channels Further Expanded; Asset Allocation Optimized
In the first half of 2008, domestic and international investments were adversely affected by weak capital markets. The Group’s total investment income reached RMB9,275 million in the six months ended June 30, 2008 and total investment yield was 3.6%. In light of market fluctuations, the Group adjusted asset allocation by increasing the proportion of investment in fixed income assets to stabilize investment returns, and achieved the objectives in different phases of investment business. At the same time, the Group focused on non-capital markets investments, all the investment projects remain on track. The Beijing-Shanghai Express Train Equity Investment plan, initiated by Ping An Asset Management Company, was formally approved by the CIRC.
Despite the troubled investment environment in the first half of the year, net profit from the trust business significantly increased to RMB639 million in the first half of 2008 from RMB275 million in the same period in 2007. Driven by growing assets under management, net fees and commission income increased 97.5% to RMB241 million in the first half of 2008.
Responding to market demand, the Group’s trust business successfully launched a slew of innovative products and maintained sound growth momentum. With the gradual expansion of the investment team and the build-out of investment platforms, Ping An Trust's investments in non-capital markets progressed smoothly and all projects are progressing at a planned pace and are expected to contribute positively to the Group’s profits as a whole in the future.
However, the falling equity market led to lower securities brokerage and proprietary trading activities, which adversely affected brokerage and proprietary trading business of the Group’s securities business. Net fees and commission income and investment income decreased from RMB975 million and RMB491 million in the first half of 2007 to RMB854 million and RMB103 million respectively in the same period in 2008. As a result, net profit from the securities business fell 40.7% to RMB401 million in the six months ended June 30, 2008 (1H 2007: RMB676 million).
Nevertheless, the securities business managed to maintain its leading position in the underwriting market for small and medium-sized enterprises. The underwriting of a RMB11.5 billion further issuance by CONCH, making a breakthrough in underwriting history of Ping An Securities.
Synergies from diversified financial service model: Cross-selling achieved remarkable result; Integrated operation platform strengthened
The depth and breadth of cross-selling had been visibly enhanced. Cross-selling accounted for 14.0% of the premium income for the property and casualty insurance business in the first half of 2008, 9.1% of the bank’s new corporate deposits, 55.8% of new credit card issued, 12.5% of new assets entrusted under the pension annuity and 12.7% of new assets under the investment management annuity business.
The Group’s integrated operation platform has been essential to the success of the financial conglomerate service strategy. It has helped to improve service efficiency and risk control and reduced operational costs.
[1] All financials are presented under International Financial Reporting Standards, unless specified otherwise
